Caterpillar cuts annual profit forecast after third-quarter revenue slump
Company blames a cut in dealer inventories amid global economic tensions
Revenues at industrial equipment maker Caterpillar (CAT) plunged in the third quarter of 2019, forcing the bellwether business to lower its full-year profit guidance.
The Illinois-based manufacturer of excavators, bulldozers, backhoes and a wide range of heavy machinery posted revenues of $12.8bn (£9.9bn) in Q3, against Wall Street expectations of $13.6bn. The company cut its full-year earnings forecast to between $10.90 and $11.40 a share, down from previous predictions of $12.06 to $13.06 a share.
Caterpillar has a global customer base and a presence across a wide range of industrial sectors, making it vulnerable to global downturns. Notably, sales in Asia-Pacific dropped 13 per cent in the quarter, largely due to reduced demand in China. In its key construction sector, Asia-Pacific revenues fell 29 per cent, against a modest 3 per cent rise in North America.
Caterpillar blamed the results on a cut in dealer inventories. Dealers decreased inventories by $400m in the three months to September, compared to a hike of $800m in the same period last year.
Caterpillar CEO Jim Umpleby said in a statement: “Our volumes declined as dealers reduced their inventories, and end-user demand, while positive, was lower than our expectations. We remain focused on executing our strategy and continuing to achieve our Investor Day targets for margin improvement and free cash flow.”